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tv   Squawk Box  CNBC  December 7, 2009 6:00am-9:00am EST

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banks. it now plans to recovery all by $2 billion that it lend to treasuries, a drop of nearly $200 billion from their earlier estimates. a new treasury report shows that the portion lent to banks shows a slight profit. the report will be presented to congress today. we talked about the government's bailout. investments with treasury secretary tim geithner just last week. >> there will be a report in the next couple of days that shows the latest estimates of the return of the taxpayer on these investments. and i think you're going to see in that report for the first time a range of estimates say that the government of the united states, the treasury, in terms of the investments in the banking sector will earn a positive return. >> geithner has said that the obama administration will soon propose when and how to end that program safely and now there's talks that the $200 billion that they've now found will be put into a jobs program.
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president obama is going to be talking about that tomorrow. >> citigroup now reportedly wants to repail $20 billion in its bailout funds. the ft has this report. people close to the situation saels says if citi fails to launch a capital exercising program by next tuesday wibt probably will be impossible to do so. the government is said to be willing to coordinate a sale of at least part of its stake during this capital raising. but the tight timing and worries about the banks' health could prevent this from happening. meantime, kuwait's sovereign wealth fund will invest the proceedings of a $ .4 billion sale in a stake in citigroup abroad rather than the local market. the kuwait investment authority converted the stocks that it owned in the bank to normal stocks and sold all of them to $1.4 billion and that equate toes a $ .1 billion profit. the gulf state's finance minister says there's no plan to sell more foreign assets in the remaining three weeks of the
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year. the wall street journal is reporting this is the first deal sold in over a year without government backing. better than expected returns were offered in order to try and get investors to buy into this deal. >> over the weekend, we had six more banks seized by regulators. that brings the year's tally now to 130 wrb creeping up. three of the banks were in georgia and is one each in virginia, illinois and ohio. the six failure res expected to cost the fdic's insurance fund more than $2.3 billion. >> when does that mean they would run out of money? >> they're already out. >> they're out and that's it? >> they can always get more. >> it's just -- >> the treasury for money. >> it's like the government owned -- it's like we have a lot of money in government, but we still have triple -- amtrust is the one that was in the weekend wall street journal. huge piece on people trying to save it and speaking up for it.
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but once again, they had gone into states in areas they had never been before to market a lot of the mortgages and everybody wanted a piece of that pie. >> now they're sorry they have it. a little bit of indigestion. five more high ranking executives threatening to leave aig if their pay is cut. the five include the general counsel and the heads of the company's largest insurance businesses. two of these people are said to have changed their minds over the weekend. the ceo threadened to quit last month, but he does not appear to be involved with any of these new threats. but the employees say they're concerned about not only the their for 2009 and what will happen for 2010, as well. >> and in the uk, they're reportedly considering imposing a super tax on banking sector bonuses. the bbc says the tax could be unveiled as soon as wednesday's prebudget report. it would apply to uk banks, as well as the british arm of
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overseaed banks. president barack obama using his weekly address to defend his handling of the economy while pledging to do all he can to re-ignite u.s. job growth. >> history tells us this is usually what happens with recessions. but the folks who have been looking for work without any luck in months or in some cases years, for them, i am determined to do everything i can to accelerate our progress so we're adding jobs again. >> the president will deliver a speech tomorrow at the brookings institution. >> the current oil price is stable and perfect, perfect now for consuming and producing nations. they would like it as high as they can get it. and it's been weird the way
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they -- well, after friday, that is below the low end of the recent range we've seen. we'll see how long it stays perfect. because a lot of people think if the dollar does just make a stand, that it may be -- did you see gold over the week sxwrepd? >> down 50 bucks. people are starting to see maybe it's just a hot asset? garnering some momentum money and at this point, it's disconnected from -- i'm not even going to say it. it's monday, i don't want to hear from you people. >> gold bugs? >> yeah. leave me alone. the country's oil minister ali al miemi made comments this weekend as he led talks in cairo with other oil ministers. opec is expected to keep its output unchanged when it meets later this month in angola. >> futures have been making a
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comeback through the course of the morning. right now, you're going to see that they're down by only 19 points below fair value. so some significant gains have been made this morning already. you still see the nasdaq futures down by about 3.5 points below fair value. again, though, this has been turning around as we watch the european markets start to make a major move and a rally, as well. let's take a look at what's happening with bonds. on friday, bonds sold off and the yields were sigh rocketing. this morning on the ten year, you see the yield sitting at 3.437%. we're getting data today on consumer credit. we'll keep an eye on that. the dollar has been weaker against the yen today. but remember, the dollar on friday skyrocketing after we saw the jobs number come out. 89.99, or sitting right at 90. and that's why we've seen a lot of the action. asian markets closed higher as the yen was rallying through some of these data today, as well. rights now you see gold prices down another $24 this morning
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after falling 4% on friday. sitting at $1,144.70 an ounce. let's get to the overseas markets right now. we're going to start things off in london, though, with steve sedgwick. he has the latest out of europe and steve, it looks as if things have been improving for the morning. >> yeah wibt has, becky. we had good gains last week, 1.5% to 3.5% gains. that's despite the fact we started off the week and ended with those jobs figures. miners are under pressure, the bifth sector down 1.5% and banks are down, as well. right around 1.2%. we were mentioning that story about banker bonuses. according to various reports, there could be windfall taxes, taxes up to a rate somewhere in the region of 60% to 70%. that could come out or not as the case may be. in the pbr, it's kind of like
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the finance bill for 2010. he'll be delivering that on wednesday. the real concern is that talent will drain away from london, could benefit new york. elsewhere this morning, a couple of other stories to clear up. cadbury is going to give its formal response to the bid for kraft on december 14th. it's said it's advisory, but it will give its formal response. it needs to be 8 pounds or above, way above the current $16 billion bid in order to be successful. one analyst today told me 945 is where it should be to capital excavate a lot of shareholders. the 7.77% operating margin which you get at kras ler potentially going forward isn't achievable at the european automakers because we have structural
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overcapacity. and it seems very interesting that the white knights in a lot of these crisis have been the white knights and now because we haven't taken out capacity, people are very concerned about this side of the atlantic. elsewhere, nick riley, the new head of opel, says look, even if we don't get extra subsidies in the german market, we don't anticipate cutting any more jobs at gm europe. that's a snapshot of the european markets. now out to christine in singapore. >> thanks for that, steve. the strong u.s. jobs data raised helps of stronger demand. a retreat in gold and commodity prices put pressure on the resource stocks here in the region. now, japan's nikkei 225 jumping 1.5%, a six-week closing high, exporters got a boost from the dollar's surge against the yen late last week. a government source said it was considering guaranteeing $7.8 billion in loans and funds for the debt laden carrier.
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over in shanghai, investors stay on the sidelines as they waited for the outkouk of the three-day policy meeting. the state will stick to its proactive fiscal policy setting an appropriate loose monetary policy stance in 2010. the shanghai composite up 0.5%. in hong kong, the hang seng fell 0.8%. commodities fell after gold prices slumped. expectations of interest rates going up in the u.s. hurting sentiment. that is the action here in asia. becky, i'm sending it back to you. >> christine, thank you very much. when we return, we've got a fresh slate of investment opportunities. rrrrrrrrrrrrrrrrrr
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welcome back, everybody. the dow futures are down, but only about 10 points below fair value. earlier this morning, you were talking about triple digit losses. in the news this morning, mining giants bhp billiton and rio tinto signing abdomen agreement. it will combine western australian iron ore operations of these two companies. the japanese government is reportedly looking at guaranteeing about $7.8 billion in funding to japan airlines. the backing would ease concerns that the carrier could run out of funds. the news is sending shares higher in asian trade tonight. let's get to our monday morning strategy session to kick off the trading week.
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joining us now is lakshman achy son. lakshman, first up, have you revised any of your numbers in terms of what you're expecting in unemployment? >> no, not really. the jobs figures are basically coincident. they help confirm where you are in the business cycle. we continue to be in the early stages of the recovery. what it does, i think, say to us is that this recovery is stronger than the last two recoveries, both in terms of jobs and in terms of gdp, which is running about 3% for the first -- you know, for the q3 and q4. and here we have -- we're going to go jobs growth a lot sooner than we saw in the last two recoveries. where most of us work, nonmanufacturing sector of the economy, we have jobs growth as of november, 30,000 plus.
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>> but you're not thinking that what we saw on friday, that this was a one off, that this was truly a change in the trends? >> well, i think the trend changed earlier this year and the recession ended earlier this summer. you know, these jobs numbers are -- there's going to be a lot of backing and filling, right? the numbers we got in november are going to be revised. but i think this trend recovery in the jobs numbers will continue. even when you look inside the mix turned hood, you see the, for example, temporary jobs and workweek, things like that, which are slight leading indicators of employment continuing to move in the right direction. cyclely, this is short-term looking at a few quarters, this recovery keeps going. there's no double dip any time soon. but you know, we're not just economists, we're students of the business cycle sxp so we can see what's not cyclical. and when i look farther out, it looks like we're going to have more frequent business cycles than we have had for the last couple of decades and that may keep unemployment higher for longer than we're used to.
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>> why is that? why do you think we'll see more of the cycle? >> well, basically, you have the two primary ingredients. the pace of expansion, since world war ii, has been getting weaker and weaker. it's like a plane losingltity attitude. and at the same time, the business cycle volatility, the size of the swings to the upside and the downside, we had the greatest recession since the depression. that volatility plus low trend growth, it apdz up to more frequent recessions. and if you have more frequent recessions, then unemployment can't get down that easily. if we want to see unemployment back where it was before this recession, we're going to need something on the order of a 10-year expansion and i'm certainly not going to forecast that. >> fred, we've watched the market really take off, stocks take off on friday morning just as the news came out. by the end of the day, you were talking about stocks up by only about 20 points. the dollar was still a lot stronger. but why do you think we saw
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stocks sell off through the course of the morning? >> becky, i think we saw a little bit of unwinding of the global carry trade, the dollar carry trade as that employment report hit the tape, it was a positive surprise. i think that caught a lot of people in a very -- in a -- caught them having to tactically make some short-term trading decisions, particularly the momentum traders. what they did was they came in, they bought the dollar. they sold commodities. you probably noticed that gold dropped like a rock, crude oil dropped off. stocks sold off, but we left the day fairly encouraged. because given the magnitude of the strength of the dollar, the rally at the end of the day was an uncurving sign. and i think investors left friday realizing that the stock market could go higher, even if the dollar strengthened. and i think that was a pretty positive sign. the news, unemployment should set with investors in a very positive way, we're looking for incremental growth in the economy as we see more indicators over the next couple
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months and we're looking for a modest santa claus rally. not a blowout rally this year, but i think it is incrementally good news for investors. as we go in and look at next year, i think most investors right now are going to continue to be thinking about small market dips to put money to work and we saw a little bit of that late friday arch. >> fred one mentioned the drop in gold prices. it was down by more than $50 on friday, down by another $24 today. you're talking about a drop of over 6% in two trading session is right now. you mentioned momentum trading. you think this is flowing into commodities? >> i think some of it is momentum trading. you have short-term traders with very deep pockets looking to take and exploit market gains. they move in and out very quickly.
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one of the things that we have seen over the last four or five weeks, in gold, we come back and see this is not the time you sell your stocks and go into gold and commodities. and we right the curve in terms of incrementally improving growth at lakshman has been talking about. we're right in his camp on that forecast. >> and and they were buying bonds and stocks. we could see that the play quint dentally in basically the commodity oriented equities and not only the u.s. markets but global markets. quality, that is our theme as we go year-end. we shift into quality, we shift into companies that have the
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ability to raise their dividends and we'll be able to ride on the incremental growth we continue to see in the economy. >> and you're starting to see some of those larger cap stocks. they say that is indicative of the bull market long in the tooth. do you agree with that? >> well, there's no question that the stock market is extended. we'll up 60% at the bottom. we see it's a ying and yang, small cap stocks take off for a few weeks. what we have seen is a market referring to actions. i don't think we're nearly as extended in the stock market as we are in the bond market or the commodity metal market. >> lakshman, one of the other big stories of the morning is this talk of another $200
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billion coming back from the t.a.r.p. funds having much more returned from the banks than had been expected. there's talk that maybe the administration would use that money to try and boost some sort of jobs program. what would that mean to growth as far as you're concerned? >> to growth, it wouldn't mean that much. even though these are large numbers, we've gotten used to these large, huge numbers. the business cycle, jobs are going to get better simply on a cyclical basis because we're in ra recovery that's stronger than the last two recoveries regardless of any of this. and that's probably part of the reason why they're healing, as it were, and they have monies at zero and they're loaning it out to us at a higher rate and eks have gone up.
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but the real problem here, you're going to get into discussions about the exit strategy, which will be the next thing everyone is going to worry about and this is affecting the dollar and gold and all of these things. the there, we should remember, coming out of the last few sessions, the fed waited 2 1/2 years to raise rates. so there is pressure for them to move quicker, but there is a relationship between the amount of time after a recession that passes before the federations rates and the length of the subsequent expansion and that goes back to my issue of more frequent recessions ahead of us. >> lakshman, fred, gentlemen, thank you very much and lakshman, i'll trying and get my head around that on a monday morning, but we hear you.
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>> sun power was upgraded from overweight to equal weight. the target stays at 35. sun tech power mentioned by barclay's upgraded, same upgrade from overweight to equal weight. potash, is the subject of some talk. goldman, last week or the week before did something in steel. so now they're upgrading a fert riser. >> and they thought steel prices had bottomed. so they had been neutral. in fact, they may have regret having been at neutral and having been a -- i don't know, regret is a strong word, but they had a $98 price target. it's gone well above that. marsha mccleanon was downgraded from neutral to buy at the same firm at goldman sachs.
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they continue to do god's work in all of these areas. illinois tool removed from the conviction/buy list at the af e aforementioned goldman sachs. price target is 359 unchanged. and kohls's was upgraded from outperform to neutral and price target is at $68. they're citing a recent pullback in the shares of kohl's. coming up, this morning's top stories, plus a picture from the futures pit. then, can economic conditions for 2010. "squawk box" is coming right back. ♪
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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick. carl will be back tomorrow. the u.s. government is now forecasting a smaller loss from the bailout of the bank. the treasury department expects to recover all but $42 billion of the $370 billion it lent to ailing companies since the financial crisis began last year. that's a drop of nearly $200 billion from prior estimates. a new treasury report shows that
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the portion lent to banks is showing a slight profit. the talked with treasury secretary tim geithner last week. >> we're going to put out a report that shows the latest estimates of the return of the taxpayer on these investments. i think you'll see in that report for the first time the range of estimates says that the government of the united states, the treasury in terms of the estimates in the banking sector will earn a positive return. >> geithner says the obama administration will say when and how to end that program safely. >> the t.a.r.p. money has a slight profit on what they lent out to the banks. i guess it's aig and general motors where they're still showing -- >> citigroup. >> freeway. but if you take the banks combined, i think it shows a slight profit. >> a lot of things changed on friday as we were sitting here wondering of whether there could
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be an outliar. the notion of when the fed starts tightening, did you see a lot of the -- >> oh, because of the jobs number? >> yeah. we'll see what they say in december, but this is going to be a snoozer, just if you were to look at the language, but no one spkted anything to happen on rates. before you annoy australia is moving. >> i guess it depends on what you see in next month's numbers. two in a row, it's the outliar. we'll see if it continues. we got a little negative on the dollar. and i still say sooner or later that that vicious cycle has to be broken. as it goes lower and lower and lower, as you draw the line, market is up, oil up, commodities up, and the dollar down, down, down, sooner or later, it's unsustainable. remember i said -- and someone wrote in, but i said i'd rather see the stock market not hold on
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to its gains on friday than the dorm come back down. and even though people were -- >> it happened. >> did you see the yen? these things were surging. and to still be up 22 points, you know, maybe that was a little bit of an infliction point. >> below 90 a little bit ago. >> yeah. >> in any event, let's get a look at some of the other markets this morning. we've been watching the futures and they've been showing a huge turn around through the course of the last several hours right now. those dow futures down by about 12 points below fair value. but again, earlier this morning in the wee hours, you were talking about down by triple digits. so this is a big improvement. this has been following what's been happening in europe as european markets have paired their losses, as well. also, we've been keeping track of oil this morning and at this point, oil prices down by about 57 cents to $74.92.
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>> that looks more rigged at 78 to 80 than it did at 140. >> how it was hanging there the entire time? >> and it just stuck there. demand numbers came in and, you know, all the bearish stuff that happened, keel see now that the dollar is -- now we're below 75 and we'll see. and when saudi arabia starts saying, whoa -- >> this is a great number. >> then you know that they're concerned about it, too, when they start showing their tales, too. >> 78 couldn't save the diamond laden streets of dubai, though. >> dubai doesn't have any oil. >> no. but if the uae was at flush as flush as they had been at 140, they would probably be -- >> spending more and bailing out a lot more. if you're watching the bonds, the 10-year note at this point, you did see a big sell-off of the bonds. and the dollar, again, after its major gains on friday is down a little bit today against the
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yen. it's up against both the euro and the pound. but again, 90 yen to the dollar right now. now below. i guess if we watch it long enough, it will bounce back and forth at these levels. we've been keeping an eye on gold and gold was down by 4%. it was dropping below $50 on friday. today it's down another $20.60 to $1,1 4/3.20 an ounce. so it dropped 6% just over the last two trading days. >> all right. kennahan, we're in the futures pits in chicago. joe, what is this? we've got brownie here. bull market. exhibiting some signs of aging. they've written this piece every three weeks, the journal has. >> this time it's on the money and investing. >> they've written this, signs of aging in the bull. they're going to be right. one of these times, they're going to be right, joe. but the journal has written this story a half a dozen times, i think about once a month. they're talking to experts that feel like this market is ahead
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of itself and they've looked like idiots every single time. we'll see. >> it's the old expression, joe, a broken clock is right twice a day. but below this piece, ahead of the tape, the fear gauge is flashing complacency. so let's talk been the vix -- it is flashing some complacentsy. is that -- are we seeing that across the board or is there still enough skepticism? >> i think friday was a wake-up call. actually, i think you talked about it quite a bit about the eventual conclusion of the dollar. i think friday was a wake-up call for everyone. the dollar just can't continue to weaken and weaken and weaken as the market goes up. eventually, you have to money to pay for anything no matter how high the market is and your real wealth is significantly diminished. so i think that's important and people have woken up to the fact that that may happen. ralt of people down here believe
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we're trading at 1103 basically even on the s&p future here. we traded that on friday down to about the 1067 level. a lot of people here believe that we have to retrace it particularly because here in the week, there aren't a lot of economic numbers. we have options of some bills and things like that. so we could see more of a technical level of trading, which makes me believe we could go back and test it, joe. >> the vix is volatile. it's either down 8% on friday. it ended down 5%. it was up 1%. the market itself was -- you know, had some wooind wide swings. >> there's been some trades, there's been some things to do, no question about th you saw it reflected overnight. we've had a full day between, you know, 11:00 p.m. and now basically in terms of market movement. >> yes. so if you're still asleep, wake up. you're missing things.
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>> exactly. quit sleeping. you've got all the holidays so sleep over. but anyways, honestly, we're seeing great interday moves, but the overall market is complacent in that we may move around a lot, but in the end, we're going to be in a range that's still fairly tight. there's still no reason to believe that we won't be in somewhat of range bound trade, barring some significant news and i don't think the significant news is necessarily something that's going to bring us down significantly. the only reason thing e may go back down to 1067, but eventually rally into the end of the year. exactly your point to start this, joe. all you hear is we're going down, we're going down, we're going down. at any sign of weakness, the volume increases as people get shorter and then they get squeezed out to the upside. >> santa claus rallies usually happen. do they happen when the market is up 63% from its lows? that makes it a little tougher, heavier lifting for santa. >> i agree, it makes its heavier
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lifting for santa. but it squeezes all the effluenelvs, so to speak. as long as there's no believers, the path of resistance is for us to keep going high he. >> and volume, can it do it on such low volume? do you expect it to pick up at all? probably not, maybe between now and the end of the year, huh? >> we may see it pick up. that tends to be a high volume week. so i would look for next week to be quite a bit of volume, actually. >> all right. thank you, joe. good to see you. >> the worst person in the world, e.s. browning, i'm naming his my worst person in the world for writing this -- >> i know jim. >> well, first of all, his initials are e.s. and his name is jim. so something is amiss there from the very start. can you tell me? >> i don't know why. i don't know why. >> i can't figure that out no
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matter what i -- i've tried everything. >> elijah. >> well, where is the jim? >> maybe it's two words, two names he didn't like so he picked a third name. >> you can't pick a third name. >> you can if you're catholic. you pick a third name when you get your confirmation. >> you can't use it. >> you can. >> you can't. mocha joe, his name is charles joseph scarborough and he didn't like charles. >> my brother is joseph brian and he goes by brian. i don't know. i'll ask him. i don't know where it's coming from. >> the worst person in the world. >> anyway, with the new year quickly approaching, nariman barivesh is a chief economist. nariman, you've put together a list. i see at the very top of it, you think that this u.s. recover will start slowly. >> that's right, becky. and the reason is very simple.
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it's the consumer. with major head winds in terms of rising unemployment, it's going to rise a little bit more before it finally starts to come down. we think the unemployment rate could break 1050 still despite what we saw on friday. and even if it's come down, it's still 10%. so that's a major headwind for consumers. we see consumers spending about 1.28% this coming year. we're not going to have strong growth with that kind of spending. >> but you still think the u.s. is in a better position than europe or japan? >> yeah. their housing problems are worse than ours. prices rose more, they're falling less. places like the uk, ireland, spain. japan is so dependent on what's going on in the rest of the world, still too export dependent. their recoveries will be a lot iffier, if you will, going forward. in that sense, we're more
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pessimistic, less optimistic, however you want to say it about europe and ya pan. >> some of your other predictions are about how that fiscal stimulus will begin to ease. you think in the other g-8 countries we're talking about interest rates remaining low at least over the next year. >> that's right. and here we're talking primarily the u.s., europe and japan. some countries have started to raise rates, australia, israel and norway. but in the u.s. and europe, we don't see rate hikes until the second half of 2010. yes, the fed may change its mind a little bit because of friday's numbers, but i'm skeptical. i think they're still worried about recovery. so in the u.s., very low rates. europe, very low rates. and that's going to be mostly the pattern in the developed world. in the developing world, india, chi china, you're going to see rate hikes sooner than later. >> do you count that in there or
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is that something that's knocked out by the rapid moves we've seen over the last three to four months? >> that's part of it. i mean, i think we've started to see the beginning of this considerable softening in commodity prices. we don't think we're going to see a collapse, mind you. but maybe in the case of gold, could be another 10 perps it's not out of the realm of the possibilities. same thing on oil. again, those aren't heroic forecasts, particularly. oil we see in the mid 60s sometime in the next couple of months. it got way out of whack, way ahead of itself. >> i think this is something more to do with what we've seen with the dollar's tivity? >> i think they're related, definitely. clearly, a weaker dollar often is correlated with higher commodity prices. so we see a slight strengthening in the dollar in the next few months because we think it was oversold a little bit. but i wouldn't push that too hard because the fundamentals for the dollar are still down.
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we're looking at a long glide path for the dollar. it's not goes to collapse, but you know, given these huge current account deficits, and they're still big, you know, the pressure will be downward on the dollar. >> nariman, another one of your predictions is that the risk of a hard "w" is still uncomfortably high. what are the factors that lead you to that conclusion? >> well, you could see a second leg or third or fourth, however you want to say it, about the financial crisis. everybody is very worried about financial real estate. that could trigger it. if indeed oil prices because of a shock in the middle east, some political event go back over 100, that could do it. we're still very vulnerable. >> nariman, thank you very much. it's good to talk to you. >> my pleasure. thank you, becky. >> we've got all this cnbc
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stuff. roberts did not commit to keeping the name, nbc universal. >> correct. it points out it wasn't mentioned until like 2170 on the press release. this is a story in the "new york times" about the nbc/comcast deal. obviously, we're very interested if what's happening with this. >> i'm just wondering what you would call it. i don't know. it's a -- >> cnbc. >> well, it's a big brand name. for a long time, we kept the peacock -- >> and it fits with cnbc and msnbc and all of these others. >> maybe roberts will call and ask our opinion on -- >> maybe not. >> you can send questions about anything you see here on squawk. i hesitate to say if you have a new name for us, what it would be, but go ahead, e-mail us at squawk@cnbc.com. >> not for us as in joe and i. >> yeah. that's okay. i get plenty of that, anyway.
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try to make it, you know, network safe, not cable safe. that's squawk@cnbc.com. a quick break now. headlines lighting up the squawk news wire when we come right back. ♪ do a little dance sun life financial has never taken government bailout money, yet no one knows our name. ♪ get down tonight that's about to change. so you'll pay for the tour, but i have to change my name? no, you're still kc, but from now on, they will be the sun life band. it's funky. sooner or later, you'll know our name. sun life financial.
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welcome back to squawk. i'm monica novotny. friday, the u.s. senate continued to debate health care legislation yesterday and they got a visit from president obama. the president pushing his opportunity to bridge the debate over several continue visual elements in the legislation. gop is hoping that may be enough to kill off the bill. the consumer product safety commission is investigationing
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one of the must-have toys of the season. the zhuzhu pets. there are higher amounts of the level antiminy could make children sick. the company that makes the best selling toy says it's product have passed thorough testing and are completely safe. a luxury movie theaters has opened in l.a. there is push button waiter service. ticket prices will cost you $22 during the week and $29 on the weekend peps squawk will be right back. stay with us. make these savings even more memorable. gecko: all right... gecko: good driver discounts. now that's the stuff...? boss: how 'bout this? gecko: ...they're the bee's knees? boss: or this? gecko: sir, how 'bout just "fifteen minutes could save you fifteen percent or more on car insurance." boss: ha, yeah, good luck with that catching on!
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♪ wipeout hi. we're here over in the chairs. i don't know why -- why are we playing -- we play different things. that's okay. we've talked about reality tv recently because of -- it's in the news because of the gate crashers, gategate because of what we call it. >> and balloon boy guy. >> balloon boy guy. the piece in the new york times today on it. if there was no reality tv, those people probably wouldn't have crashed. they had cameras. now the question is, and bravo is part of the comcast -- part
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of the nbc cable family. and you've got ready-made cue ratings of what for these people? cue ratings refer to how well known someone is. i don't know if someone limes the salahis, but -- >> you can have a strong negative cue rating. >> yes, you can. which not always a bad thing. >> not necessarily. >> it's not a bad thing for tv. what do you do with dravo? don't you think you put this woman on at this point? >> she's been auditioning for "housewives of wash d.c." >> you deal with her being on tv already. she was on the "today" show. is it worth the backlash of what it would do potentially, the ill-effects -- >> they were going to put o.j. on to talk about the book "if i did do it," that didn't happen. this is not nearly that. but -- >> it leaves you with your mouth going --
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>> all reality tv leaves you with your mouth going like that. apparently a lot of groups representing italian-americans are not happy about the jersey shore. >> it's ridiculous. have you seen some -- >> i haven't seen it. i want to after reading this. isn't seaside height, the place they call sleeside heights. it's not the best part of the shore, right? >> no, no. >> if you look hard enough -- >> there are some upscale places -- >> don't go overboard. >> this is seaside heights here. they got everyone -- instead of just getting a representative, they went across the board italian-american. a lot are from staten island -- >> the bronx, they're not even from new jersey. >> well-built, tan, chog involved. >> a lot. >> sound like fun to me. >> you put a bunch of kids in a shore house. >> they call themselves -- it's in print but they call themselves guidos which is still
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she offensive to some people. then the other show stirring a lot of publicity and anger is "find my family." >> right. >> where they get these adopted people that are grown -- >> to find -- >> i don't know if they just ring the door bell and some unsuspecting birth parent opens it and -- >> what i thought was interesting is the outrage is coming from the adoptive parents who are saying this marginalizes adoptive parents and their role and they don't want shows going on. >> birth parents, if you're 50 years old and you finally found, what have they got to do -- you could bump into someone at a supermarket and they have as much to do about your life -- >> it's interesting. these reality shows certainly cause -- >> exploitive and people are going to cry. >> it is. and it leads to all kinds of hurt feelings, at the very least. you could see someone snapping. >> was it sally jesse -- >> someone killed someone because they were embarrassed --
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>> they were attracted to them. >> yeah. in any event, we have a lot more to talk about this morning, including this morning's top business stories. one of the men behind the nbc deal. pennsylvania governor ed rendell on the work of creating jobs. "squawk box" will be right back. so many arthritis pain relievers --
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taking his fight to washington. pennsylvania governor ed rendell on how his state is faring in the face of high unemployment and what he plans on saying to the president about the state of the economy. the media deal of the year has been struck but now that comcast is buying a controlling stake in nbc universal, the deal is getting the intense scrutiny of both regulators and wall street. one of those who made the deal
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happen tells us why this makes sense. getting you ready for a big week on wall street. guest host and cnbc contributor richard bernstein joins us with his outlook for markets in 2010 as the second hour of "squawk box" begins right now. good morning and welcome to "squawk box" here on cnbc. i'm joe kernen along with becky quick. carl quintanilla is off today. we have a busy hour with an appearance by pennsylvania governor ed rendell who will be joining us in about 15 minutes from washington where he's promoting his jobs coalition created about governor arnold schwarzenegger. first becky. headlines. among our top stories this morning, the t.a.r.p. program will reportedly lose $42 billion. that is $200 billion less than prior estimates. the official numbers will come
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today from a treasury number from congress. it comes on better than expected returns on loans made by the government to the banks. five top executives at aig threaten to quit if their pay is cut by the pay czar kenneth feinberg. last month benmosche said he would quit but later reconsidered. and gm taps spencer stuart to conduct a ceo search. they are looking for a candidate familiar with operating in asia and also considering candidates that come from outside the auto industry. our guest host has more than 25 years of experience on wall street. he's a contributor of cnbc now, rich bernstein former chief investment strategist at merrill lynch, now ceo of his own firm. where did you get this name, richard bernstein capital management? did you pay someone for -- >> yeah, we paid consultants a lot of money to figure this out. >> big pr dollars. let's start with this, rich. we're back to now.
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right in the middle of trying to decide whether a deep recession is so stretched it has a sharp snapback or whether there's so many secular problems with what happened this time, the credit bubble, that we're going to have a muted recovery for years. >> you've nailed the discussion right on the head right there, where you have -- i think the secular backdrop is still miserable. secular backdrops only change when you have dramatic structural change in the economy. it's clear that that is really not going on. washington is now pushing policy to make structural changes in the economy. however, what washington is doing, and i would argue doing quite effectively, is getting a cyclical wind behind the economy. i think within this bad secular backdrop, which has been going on for quite some time, by the way, it's not new, we're seeing a very powerful cyclical upturn. >> you don't mean that new regulations to make sure banks
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have more capital -- when you say a structural change to deal with the secular issues, what are you talking -- what secular issues? >> to narrow down and simplify, i would say we have so shrink the financial sector in the united states. we can all say about the financial sector is x percent of the economy. i don't think that's very healthy when all we're doing is making loans to other financial companies and the interbank lending is still very, very high. that's not productive use of lending. on the other side we need more real investment in the united states. we need the cost of capital to be lower in the united states. it's funny, in fact, some guests, is everybody talks about relative costs of labor, that labor in china is so cheap relative to labor here in the united states. nobody talks about the relative cost of capital. remember what goes into production is capital and labor. and the cost of capital outside the united states is very cheap as well. and there could be things the government could do to lower the cost of capital in the united states. >> what kind of things? >> like investment tax credits and things like that for investment put in place in the
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50 states. not give them a tax credit so they can build factories in china but give them tax credits for building factories in the united states to lower the cost of capital and, therefore, make rates lower. >> what has the government done that has been working on the cyclical side? are you talking about the stimulus package? are you talking about the fed? >> i think it's both. i mean, i would argue in terms of how effective each has been and maybe some programs have been more effective than others, but the fact that you do have both monetary and fiscal policy clearly on the stimulus side has got to have some effect in the economy. i mean, to say it's going to have no effect whatsoever is immensely bearish and it is having that effect. we saw it in the slowly, gradually improving employment data. >> but we don't want the dollar to just be undermined completely. so, was that any type of change on friday? the dollar had a huge move. gold down -- >> well, i mean, people talk about bubbles and i think people use the word bubble way too
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frequently these days. but if you had to use that word, the one that comes the closest to a bubble right now would be gold. by far. i mean, bubbles prevad society. i will tell you in the mailer that comes with all the coupons for your local chinese restaurant and everything, this week in our mailer, we buy and sell gold. >> i've seen that, too. >> we have the ability to put you in one of those faces where we can't see you. if you're going to say gold is a bubble, we should put you in silhouette and have you -- because -- >> people will -- >> you know there's people -- some, you know, there are tens of dozens of people right now watching you -- >> right. >> -- saying, you know -- >> he's nuts. >> i'll pass on the mail that comes to me. you just called gold a bub snl are you insane? don't you know the people you're dealing with here? >> i said, if we had to call something a bubble, i think that's what we should call a bubble. i'm not sure it is a bubble because i don't think it matches it -- >> backtracking. >> no, i don't think gold. i don't think gold is a diversifying investment. correlation to stocks has gone up. people are way too excited about
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it. the flow of funds into gold could continue and gold could go up. some very smart people starting gold funds now. >> i know, paulson. >> right. we could see the flow of funds go in. but it's not an uncorrelated asset anymore so you're playing global growth as you are with emerging market stocks, commodities or anything else. >> we had our guest this morning from the economic cycle research institute. he said that right now we're talking about these economic cycles coming more and more rapidly. more fast ups and more fast downs. do you agree with that? >> i'm not sure with the timing they're coming any faster. the booms and busts, u.s. corporate profits which i think is an equity investment, u.s. corporate profits are booming and busting like they have never done before in history. >> why? >> i think largely because both the operating leverage and the financial leverage that is slowly been built into our economy through time. but the amplitude of the profit
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cycle, how high and how low you go, is off the charts in terms of where you are relative to -- all the way back to the 1930s. >> we'll hear more from rich throughout the show. we'll work on that silhouette thing. >> changing my voice. >> disguising the voice and everything else because -- >> maybe i'll have to wear a wig. >> you can't stay here for the rest of your life. you have to leave here eventually. of course, we're in ft. lee. where are we? >> don't tell anybody. the deal has been struck but now that agreement between ge and comcast over nbc universal gets the scrutiny of both investors and regulators. joining us right now, one of the advisers to this deal, aria, he is the vice chairman of investment banking. he's at the ubs media conference which is kicking off in just a few minutes. and you've been hosting this media conference for the last ten years. you're going to have some of the biggest names in media there today. brian roberts, jeff zuker, carol barts of yahoo! jeff bucus,
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sprint ceo, all of these people who are going to be convening here. what's the mood this year versus maybe last year or as long as you've been doing this for the last ten years? >> well, good morning. good morning, everyone. good morning, becky. thanks for being here today. i do think this conference is a lot different from last year. everyone really came out last year to try to figure out if there's any visibility, really, into this current year 2009. no one had any predictions. now people are feeling a lot better about things. clearly we're not out of the woods yet but i think you'll see companies coming here today to really engage with investors around what they predict for 2010. and starting to see a little light at the end of the tunnel here about the economy. >> are they feeling more optimistic because they've actually seen advertising revenue turn or is this just starting to see that they're moving further and further away from the brink that the nation was facing a year ago? >> well, there's still a lot of tentativeness around the messages from the company executives, but i do think they're seeing the advertising
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market turn. clearly, no one feels confident yet. but i think that the companies now feel a little more emboldened about deploying capital again, whereas last year there was a much more focus on hoarding capital, building capacity, and today we're seeing companies really feel more comfortable deploying that capital. >> and you've said that you think these companies are emerging from this recession stronger than just about any other time you've experienced. >> yeah. i think what goes overlooked around this credit crunch versus other ones, at least for media and telecommunications companies, is that the balance sheets of the largest companies, by and large, are the best they've ever been coming out of a recession, coming out of a downturn, like the broader investment base where a lot of cash has been on the sideline. companies have a lot of dry powder. i think that's cushioned the blow a lot while they're still concerned about the top line and about revenue trends, the balance sheets are strong. and so i think companies now have the ability to make bets, place investments, come back
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into the market, and actually position themselves for the upturn. >> the other side of good balance sheets is you don't get the cyclical upturn you would normally get, in other words the operating leverage isn't that great. where are these companies going to find their growth to make up for that lack of operating leverage we saw in past cycles? >> well, there has been a lot of cost savings and expense reduction during the last 12 months. i think when you see an improvement in the top line it will come right to the cash flow line which should help both bottom line results, by and large. i would also say that, you know, the companies, you know, are not seeing a lot of fundamental growth in the media business today. which has been well documented. so that really leads to tra transactionses where companies that had their eye on those that could bolster the portfolio now may be the time to pursue those with all the discipline associated with an environment not true back. >> spoken like a true investment banker.
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you advised on the comcast/nbc universal deal. there are a lot of people who said, okay, what can comcast do with this company that ge couldn't? and will the regulators allow them to do those things? what do you think? >> well, we'll see how the regulatory environment plays out. obviously, the company and comcast is a lot different from ge in the sense it is a media company, it is a -- the largest cable company in the country and has ideas about how to deploy content and leverage the cable channels that nns hbc has alrea built. complementary assets will be looked at and also the opportunity for innovation. brian roberts is an ambitious executive and clearly with not only the cable channels but broadcast television and theme parks that nbc brings to the table, there will be a lot more to come in terms of innovation. >> it seems like you can make a case for the network's ability to reach, you know, 40 million
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people, whatever it is, you know, we understand how that works. what about the affiliates, though, where they're really dependent on local advertising from car companies or financials and you don't get any subscription fees. do you think in mr. roberts' heart of hearts, is he committed to that in a long-term business? >> i'll let brian speak to his -- >> don't you advise him? >> he'll be here. i'm the manned behind the scenes up until now. but he'll be here later today and speaking about -- >> what would you do? >> well, look, cable and comcast, obviously being the largest cable company, has been a local business from the beginning in 1950s. so there's a lot of respect for the local markets, a lot of respect for the local advertising market. cable has played there for a long time. this is not just new to the company. so i think they'll bring a lot of experience and respect in the local markets to the deal. >> so that bottle's not broken. that can be salvaged some way.
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>> we're at a moment in time where a lot of things have to be salvaged and we're at a point in time where we're potentially at a bottom for a lot of the advertising-based businesses, including local. we'll see if the wind's at their back. >> you mentioned that a lot of these companies have this dry powder to use, that some of them may be looking for acquisitions in some of these deals. who's somebody who might be looking for an acquisition? somebody like a time warner? >> i don't want to comment about any companies that have talked about acquisition strategies with us. look, i do think this deal with comcast and nbc will spark a debate throughout the conference, throughout the year, around content and distribution models coming together. and it will put pressure on the strategies of all the executives to think about whether they have the complete set of assets. you know, cablevision is another company, cable company, which has rainbow, which are cable channels. comcast is not alone. there are other pure distribution companies like time
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warner cable, which has felt the opportunity to go on their own without the content company. and they'll have to defend that model to the investors this week. >> would you at least concede the deal was comcastic? can i get you out of this shell? i would like to get you out on the weekend. would you at least call it comcastic for me? >> come by later for a beer and we'll talk about it. yes, we're very supportive of the deal. as adviser of comcast believe it was very good structured and a good deal for all parties. it's not just the elegance of the structure, which the article you're referring to, but operationally what the company can do from here. i think investors have embraced it so far and a lot more to come after they present today. >> we want to thank you very much for your time. we will be watching the conference. again, the 37th annual media and communications conference coming from ubs, he's hosting that and we'll see more from you seo soon.
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>> thank you. >> thanks a lot. if you have any comments or questions about anything you see here at "squawk," go ahead and e-mail us at squawk@cnbc.com. geithner is back in washington to push his jobs agenda. gold extending that retreat as the dollar rises. you're talking about a drop of another $26.50 today. that's a drop of about 6.25% over the last two trading sessions. the trading block is standing by to tell us if this trend will continue. time for today's aflac trivia question. what was arthur miller's first broadway production? (sneezing): ah-choo! hope i don't miss work this christmas. yeah, how will you pay for things like food...electricity? dental bills... gazooks. you need a back-up plan ho, ho, ho. that's why we have aflac! so i'll have cash to help pay bills!
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great...but what if you're still not better by christmas? hmm... afllaaccccccccc!!!!!!! (santa): aflac. we've got you under our wing. rudolph's better... but now blitzen's sick!
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now the answer to today's aflac trivia question. what was arthur miller's first broadway production? "the man who had all the luck" which opened at the forrest theater on november 23, 1944. according to the ft citigroup wants to repay $20 billion in bailout funds. newspaper reports the people close to the situation say a citi fails to do it quickly, to launch it by next tuesday, that it's going to be practically
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impossible to do so until after the company reports results in the middle of january. the government said we're willing to coordinate a sale but at least part at stake with the capital raising. the tight timing and worries about the bank's health might prevent the sale. bank of america's selling a commercial mortgage bond deal without talf backing. it's the first being sold in a year without the backing. again, it's the first time in over a year that they've been able to sell something without government backing. the bipartisan group building america's future is hoping to reverse the economy's job losses by pushing for new funding for infrastructure projects. pennsylvania governor ed rel den rendell is in d.c. this morning. and you went democrat, republican and independent on this. you got an independent, mayor bloomberg, and a republican,
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governor schwarzenegger, all involved. why wouldn't this be the most bipartisan of things. we all agree we want jobs, right, governor? >> no question. infrastructure has traditional by been bipartisan and some leading conservatives in the congress, congress mica, republicans are also for increased infrastructure spending as a way to create new jobs. >> we were down for the jobs -- the jobs summit on thursday with secretary geithner, valerie jarrett and others. one thing we did get sort of the gist of, governor, was that the government would like to grease the skids but really maybe let the private sector do more because of deficit concerns. is that what you're doing here as well? >> to some degree. we want in this short-term jobs bill, which we believe will include infrastructure, we want the creation of something called a national infrastructure bank, which would be a tremendous vehicle for private capital for credit assistance, for tax
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incentives, for private investment, the private/public partnerships. we believe it has to be a part of the infrastructure strategy, regardless of the economic health of the country. certainly now that we're worried about debt and deficits, private funding has to be a part. >> did that surprise you on friday that the best report in 22 months? are you seeing things on the ground in pennsylvania which made you think things are improving? >> yeah, absolutely. i get a sheet every two weeks on business closings and layoffs and openings and expansions. for my first 5 1/2 years as governor, the openings outstripped the closings 3 to 1. last august it started and it was brutal for about 11 months. but the last two months or so, openings and expansions have been holding their own. >> is that because you're seeing fewer closings or because you've seen a big surge in openings? >> a little of both. when you say openings, it's not just openings, it's expansions. businesses adding significant
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amount of jobs for the first time in, gosh, since august of last summer. >> but we're worried now that, you know, we'd like to -- we don't want to take two steps forward and three steps back. and nobody knows whether this was a one-month thing or whether it's the beginning of a trend, but do you think that small businesses, governor, are hesitant or uncertain about whether they should hire now based on some of the things that are happening in washington, that they can't plan for, whether it's health care, cap and trade, the epa or -- i mean, take your pick, taxes going up. >> there may be some element to that. i think it's overdone. i think small businesses can't get credit, they can't get loans. and i think the president's economic plan is going to address that. i think you're going to see a tremendous uptick in the amount of small business authority loan guarantee, the program that's going to guarantee loans, which will convince the banks to start loaning again to businesses who had a long history of being
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credit-worthy. that's the irony here. it's not that anybody's asking the banks to make bad loans. we're asking them to make good loans they used to make with regularity to businesses that have a good balance sheet. so i think that's the element of what the president's doing that will help small businesses the most. but don't underestimate the power of infrastructure because what people forget, they think of major construction companies at the site. but what building america's future wants everyone to focus on is the orders that flow from infrastructure spending to concrete companies, so asphalt companies, to steel companies, to businesses big, mid-size and small alike. infrastructure produces a lot of goods. we have to manufacture stuff to repair a bridge. we have to manufacture stuff to build a mass transit rail spur. and that impacts so many different forms of our economy. >> governor, you know more about this than i ever will, but it seems to me one of the simplest forms of getting investment back in the united states isn't being talked about, and that's just a straight investment tax credit
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for investment put in place in the 50 states. i'm not talking investment tax credit where you can build a plant in china. i'm talking to put a plant in pennsylvania, new york or texas. how come people never talk about those things anymore? >> interestingly, it's a great idea. i've seen it work on a smaller scale in pennsylvania itself. interestingly, it was an idea discussed first by senator kerry in his 2004 campaign and then by president obama and hillary clinton in the 2008 campaign. it was a big campaign issue. i think it makes sense. i heard your discussion about capital being more expensive in the united states. and an investment tax credit would be one way to get at that. >> governor, we appreciate your time. we know you've got to run. i think you're going on one of our net -- or sister networks. yeah, give them our best on mocha joe. >> remember, guys, infrastructure. >> got it. coffee. thank you. see you later.
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all right. up next, ubs america's ceo robert wolf recently met with the president at his job summit. we'll ask him about what advice he gave the president on creating jobs. as we head to a break, take a look at oil this morning. oil prices have been dropping, down another 1%, just under75. "squawk box" will be right back. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action-- tdd#: 1-800-345-2550 you know-- i have to see what's going on. tdd#: 1-800-345-2550 and when i pull the trigger... tdd#: 1-800-345-2550 ...i've got to get the best price out there. tdd#: 1-800-345-2550 (announcer) try the new schwab.com tdd#: 1-800-345-2550 for yourself. tdd#: 1-800-345-2550 call 1-888-4schwab
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welcome back to "squawk box." let's take a look at the markets. the markets have been improving through the morning. well, right now you're talking about the dow futures down by 20 points below fair value. that is a much better picture than what we were getting earlier. some top stories today, a failed bank is leading to potential profits for some investors. new york community bancorp is taking over the new york community bank. apple has acquired digital music service lala for undisclosed amount. they are trying to extend their online dominance. lala specializes in music delivery via internet streaming. just one economic number on the calendar today. the government will release
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october consumer credit figures. that's coming out at 3:00 p.m. eastern time. economists expect outstanding consumer credit to have shrunk by $10 billion over the course of the month. our next guest is one of the most influential voices on wall street. joining us from new york in a "squawk" exclusive is robert wolf, chairman and ceo of ubs group for the americas. good to see you, mr. wolf. good morning. >> good to see you, joe, becky. nice to see you, richard. >> rich bernstein is here, of course. i don't know if you got to see areyh on earlier, bob, but we're wondering about the state of media in the future and who would have believed that a cable company would eventually buy one of the big three -- or now big four networks. what about the advertising-based model? with what ubs thinks, is that slowly going away to -- or at least going to be combined with the subscription-based model?
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>> well, joe, i think first of all it's great to be here from our 37th media conference. we'll have 2,000 investors, clients, shareholders and ceos telling their story. listen, it's been a lot of consolidation and restructuring this year. you've had comcast/nbc, disney/marvel, you've had liberty media with xm sirius, restructuring the charter. a lot going on in this industry. i think of the trillion-plus in corporate debt, 10% has been media and cable. so their balance sheets are strong. and my guess is, you'll probably see continued consolidation. i think i heard areyh and rich and becky speak earlier about, you know, very good balance sheet and a lot of cost cutting but not a lot of growth yet. and, you know, i think that's why you'll probably see continued consolidation come into 2010 and beyond. >> do you think that -- you know, the president, do you see
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more antitrust teeth going into all the agencies? do you think that they're going to look closely at this and say some things aren't going to pass muster? >> you know, i don't know how the fcc will look at this. i mean, we're certainly hopeful that u.s. companies will continue to consolidate and continue to grow both domestically and international. we obviously believe in open and free markets. and so, you know, our perspective as advisers for these firms are, you know, figure ways to continue to use your balance sheet to continue to grow. and i think it's important. we're certainly hopeful that this gets done. >> hey, robert, you were at the job summit for the president last week. what advice did you give him in terms of how to create more jobs and convince companies to create more jobs? >> becky, i wasn't able to go to the jobs summit but a few weeks prior to that our advisory board met privately with the president, and it was on jobs. and our group really pitched
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three different topics. jeff talked about the need to increase exports to boost employment. john dorff discussed retro fitting and weatherization of housing and schools, and myself and charles phillips, president of oracle, brought up the idea of a creation of a national infrastructure bank, which i think is interesting since you just had governor rendell on prior to this. >> what would that bank do? >> our idea is it should be an independent agency that's literally created partly with the budget. there's about $5 billion set aside each year for infrastructure. our idea is to use public and private funds at the project level. so we can look at things that are national or regional significant, very large scale. things like municipals can't get done or build america bonds. things like an electric grid or high-speed rail or water
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treatment centers, looking at sewage. it wouldn't take away from the public programs of transportation or green energy, but it would be separate from the appropriation process, to really look at infrastructure long term as really a future. and it's a way to look together for our engineers and construction and the redevelopment of our nation. and so i'm glad to hear governor rendell spoke about it before. i was also glad to hear that the president spoke about it in his allentown speech. >> robert, it's rich bernstein. you mentioned consolidation. in my previous employer that was one of our big themes, investment themes, was consolidation this year and next year. what other industries do you at ubs think will have consolidation themes going on, besides media, which you've talked about already? >> you know, i think, you know, you've had a whole slew of companies restructure their
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balance sheet, lower their interest expense. certainly, i think, energy companies look interesting with the increase in commodity pricings and the changes that will go on with green energy, you know, possible, you know, governance of carbon and emissions and things like that. you know, i think, you know, it could be interesting with health care, based on what health care legislation continues. you've obviously seen a lot in the pharmaceutical industry. i think that could continue. you know, i think a lot of industries going to see -- unfortunately, we continue to be in a slow growth environment. gdp's expected to be 3% or below. and i think you're going to see consolidation as a way to look at growth. i think that certainly that's what comcast sees with nbc. >> bob, sometimes when we do have people that disagree with this administration on certain things, and about the ability to create jobs, they talk about the uncertainty that small businesses are facing and others
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talk about what they see as swa of an assault on capitalism, on business, wall street not very well thought of at this point, health insurers not very well thought of, luxury resorts not very well thought of, las vegas is reeling from comments. private jet makers, i don't know, i'd get out of that business at this point. but as a capitalist, do you think there's a reason for them to chafe under some -- i mean, the corporations do create the jobs you're trying to get. >> listen, there's no question from my perspective is that the private sector's going to bring this country out of a recession. it's going to be the main thing and the main stimulus to job creation. i do think it's a difficult situation right now for small businesses. all of the wall street and commercial bank firms are in a deleveraging process. firms will leverage between 30 and 50 times over the last two years. it took, you know, 10 to 15 years to build up. and now everyone's trying to
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delever in a 12-month period. i think you're going to see leverage probably below 20 times for most of these companies. and so i think at the end of the day, as we delever, we have to then look to get our capital back out into the marketplace and to companies that are going to grow. and it's a tough balance right now. i think it's a difficult situation. >> mr. wolf, we appreciate your time today. good luck with the meeting and everything else. hope it goes well for you. >> well, good, i look forward to seeing you guys soon near the holidays. thank you. >> very good. see you later. still to come on "squawk box," we get to your tools of the trade. the volatile world of oil, gold ask currency.
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it's monday. that means we have a new week of trading set to get under way. let's go our trading block. joining us from the cme is rick from jpmorgan futures. on phil, i want to start with you because we have seen a huge
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move on gold prices. down better than 2% today so down 6% over the last two trading sessions. is this the beginning of the end for gold or a buying opportunity? >> well, i'd probably have to say it's a buying opportunity as opposed to the end because we haven't seen all of the statisticings come out that would affect gold. first of all, you have a shortage of gold supply relative to demand. second of all, we see this spike was based upon an encouraging employment report but normally when the employment report gets good, inflation fears also get good. so it was counterintunetive that gold would decline. >> unless you had a situation where gold was climbing so rapidly because, a, moves of the dollar and, b, momentum trading. >> as i sat here last week, you recall i said the thing that would put a stopper on gold temporarily would be the increase in dollar value because those parody figures have to be absolute to some extepnextent. many commodities can climb along with the dollar.
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what we have to be careful of is that the investment momentum in gold is quite considerable. we saw a similar spike down about two weeks ago. gold not only recovered from that spike but made new highs. i'm not discouraged. i have said gold is not an investment. i agree with your new commentator here. it doesn't have a yield. it doesn't have a dividend. it doesn't yelled rental income as do properties. on the other hand, as a hedge against the paper economy, gold has always been number one and probably will continue to be number one. >> what's appropriate hedge, though? are you talking maybe 5% of somebody's portfolio? 10%? do you start getting crazy when you get much above that? >> here's the problem. in the '70s when gold was relegalized, i know it's not a word, but that's what they did. when it was made legal again to hold by consumers, the reel rul thumb people were touting was 5%. that was when the overall investment capital base was not
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that huge so 5% was not unrealistic. if 5% of all of the pension funds andfy dishary money decided they wanted to go into gold you would look at prices of $2500 an ounce. that's not realistic. it also has exposure because it's a static investment. if we get a handle on the economy and if the fears subside, that would not be a particularly good thing to do. >> peter, let's talk about oil prices. they're down by better than 1%. some comment from saudi arabia today saying they think where oil prices have been are just fine. should we read that as a sign they think prices are going to drop from here? >> not necessarily. i mean, basically this market has been in a trading range for the last month and a half, two months. it doesn't seem to have the ability to get over 80, but every time we get down under 74, 75, we start seeing buying. i think oil should be a lot lower. you know, i think it certainly could be under $60 based on the
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fundamentals. but we continue to have a lot of interest in this market on the expectation the economy's getting better and that industrial demand will pick up. if that doesn't work, every time the dollar drops or equity go higher, people draw parallels and say those are reasons to buy oil. so we have a lot of reasons out there. and if that doesn't work, we've got cold weather and we've got iran. so there are a lot of reasons right now not to expect this to fall too very far right now. >> what would it take to get things back in line with what you think are fundamental prices? >> well, it would take a normal winter. you know, i think probably we have to get through the heart of winter, which is december 15th to january 31st, without any brutally cold temperatures. i think then we have to make sure that maybe the iranian situation stabilizes. and i think we need to see a dollar that's flat or getting stronger for this market to return to the fundamentals. >> boris, we saw some extreme moves in the dollar on friday,
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sharply higher. you're now talking about the yen to 90. where are things headed? is this the beginning of a break or something that's just a temporary gain for the dollar? >> i think it's temporary gain for the dollar for now. that doesn't mean it's not going to strengthen for a little bit. just my two cent on gold before we go to the dollar, first of all. gold is still trading as an antifee play and trading as a fiscal problem play. therefore the nfp printing well is the reason why gold dropped because the whole idea being if we start to see job growth, it's obviously going to create much better budget revenues going in 2010. that's the reason why gold rallied a little bit. long term i'm just as bullish, it's foolish. don't see the fiscal deficit problem going away. that's the reason gold collapsed so much. as far as dollar gaining, there's two markets as far as dollar goes. the dollar/yen market is trading off yields and if you look at the bond market and you believe the yields are going to steepen,
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dollar/yen goes high. euro dollar and pound dollar will trade pretty much off the risk trade. pound/dollar was one of my favorite shorts last week and continues to be because i think the equity markets are come in and the pound will suffer the most given that dynamic. >> when are we talking about a raise in rates for the united states, in particular? >> i think it's way too premature to think of a raise in rates. if you look at the fed's monetary policy, they tend to be very cautious. they want to really see this recovery be sustained before they even consider raising rates. of course, you know, the bond market is going to anticipate that move and if we do see a steepening on the curve, that's going to be very positive for dollar/yen. dollar/yen is the most correlated to the u.s. yields. that could go further. >> rick, we were watching the stock indices with a little bit of a wobble earlier today. they've come back. we're only down by about 20 points on the dow right now. but what are the major factors driving stock prices today? >> beck y i think you'll see people probably considering to
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sort out friday's numbers and their interpretation of them. i think as well, you know, you're already in the second week of december so i think there's going to be year-end positioning, people wondering to take something off the table at this point. the indices, still really being considerably ahead of where most analysts thought they would be at this point in the year. i think if you spool back to early september, most people would have been looking at s&p 1050 as the optimistic best by the end of the year. >> right. >> you know, we're considerably above there. it wasn't just a one-shot deal. we spent a significant amount of time up there, which really lends legitimacy to what's going on in this particular risk asset class. >> could we be talking about s&p 500 being 1200 by the end of the year? we've had a few strategist who is have come in and said that. >> i suppose it's possible. personally, don't think that's the case. i think you'll see people who have money in the market and who have had money in the market since probably the end of quarter one, some of those brave souls who got in early, probably want to lock in decent gains that are going to mark very nicely on end of year
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statements. but i think if the s&p does sink a little bit here, it's going to be a buying opportunity for those people who have sort of been a little reluctant to get in, not quite having the confidence this thing is turning. >> gentlemen, thank you very much. we'll talk to you all very soon. again, that's our monday morning strategy roundup. coming up, the treasury department reportedly expects to recover more money than they expected in the first place when the financial bailout. we'll get reaction from congressman ed towns of the house oversight committee.
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let's get more insight from our ghost host, cnbc contributor rich bernstein, former chief investment strategist at merrill lynch, now ceo of his own firm, richard bernstein capital management. let's talk about some different sectors you think will -- if we do assume you want to go into the stock market, how would you do it? would you be -- some people are saying utilities might be a good place to be. would health care represent a bargain? >> well, i think if i had to pick -- let's change sectors for a second and not do economic sectors, let's do market segments. i think the place to be is small cap value. i think this is going to be the first december -- you would know this better than i do -- but the first december i can remember
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where people aren't talking endlessly about the january effect. >> i haven't heard that mentioned. >> because things -- >> things aren't normal. >> things aren't down, up 60%, but still down from where they were. you can't do the tax loss stuff. >> but there's more to the january effect than simple tax law. academics have done studies in countries where there's no year-end taxes and you still get a january effect. so i think that's the place to go. the reason why i think small cap value is so attractive here is because it's a lot of the same effects we've been talking about even this morning with gold and commodities. it's a cyclical plague but yet everybody's gaga over commodities in china and nobody is talking about small cap value. and if you think the u.s. economy is going to continue to improve, given some statistics we saw last week, it might be an outperformer. >> i've had a lot of people who have come in and said this is big cap stocks' time to shine. you're talking about real value,
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getting a premium for being big. >> i was a huge fan of large cap growth. that's a more defensive position. if you think the xi's going to rebound, you want more cyclicality in the portfolio than that. >> we'll hear more from rich throughout the show. i have some other things -- i just thought of it. we don't have time right now. >> we'll get back to it. here's here with us more more than an hour. when we return, we'll not only have more from richard. we'll be talking about the momentum moves, moseying from canada and united states, rodgers communications weighs in on the media deal of the year between nbc and comcast. we'll talk about the future of the cable industry and whether or not the nbc deal will create a media merger sparks. "squawk box" comes right back.
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okay. stocks to watch, we picked this for rich. i want to see if we can get you -- get you a little teary on this. bank of america/merrill lynch making a lot of comments. do you get at all sentimental about -- >> no. i shouldn't comment one way or the other. >> but if you're wondering, he seems fine, actually. upgrading american express, capital one and discovery. american express goes to neutral from underperform. do you know how long they've had an underperform on this? >> no. >> it's at 40. it was at 9. i mean, that's -- you obviously weren't there to tell them not to do that. capital one upgraded to neutral
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from underperform. i think that's done pretty well, too. and discover financial goes from neutral to underperform. the company is upgrading the u.s. card stocks as an accelerating economic recovery to aid investors to view the sector more optimistically. i can't do the hand signal i'd like to do with that report. >> oh, what hand signal is that? >> i can't do it. here, i'll do it -- i'm below the ticker. dupont downgraded to neutral from underperform. how do you know about that? >> i don't know anything. >> okay, anyway. >> i don't know anything. i learn a lot from my co-anchors. coming up, the november jobs report caught some by surprise. now economists may be rethinking the road to recovery. we'll see how forecasts could be changing. plus, how the mid term elections could be another challenge for the white house.
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the fallout from the jobs report. nonfarm payrolls fell by just 11,000 jobs in november. the unemployment rate is 10%. average hourly earnings increase 0.1%. find out if forecasts for the recovery are about to change now that economists have had a few days to try to digest the november data. and will the economy and the deficit be under control by the midterm elections? >> mr. brownback, mr. bunning, mr. burr -- >> former deputy treasury secretary roger altman and forminger u.s. congressman jim nussle will tell us about this other battle facing the white house as "squawk box" begins right now. welcome back to "squawk box"
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here on cnbc, first in business worldwide. i'm joe kernen along with becky quick. carl is out today. he'll be back tomoow. he's out friday, i think. four days, nice. nice. >> got some days to burn. >> he does. cnbc rich bernstein is our guest host, former chief investment strategist at merrill lynch, now ceo of his own firm, which is called richard bernstein capital management. >> right. >> what's your middle name? >> i don't have one. >> no kidding? >> what? >> i don't have a middle name. >> really? >> i guess my parents were not very creative. >> this is trivia we're going to remember that. we'll mention that again. that's kind of weird. i don't know i've ever met anyone that doesn't have -- >> really? >> it's not common, is it? >> no. >> let's take a quick look at the markets -- would you like one? >> it doesn't bother me one way. would you like to give me one? >> i don't know. if you feel you're missing out on something. >> no. >> are you sure? >> i thought it was kind of cool not to have a middle name. >> unique. >> yeah, it is kind of neat.
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you saw futures are flat. dow indicated down about three points based on fair value after a weird session on friday. there's citigroup. i guess becky's going to talk about that. >> well -- >> go ahead. >> we're going to talk about t.a.r.p. first. the u.s. government is now forecasting -- we'll get to citigroup in a minute. the u.s. government is forecasting a smaller loss from its bailout of banks. the treasury department reportedly expects to recover all but $42 billion of the $370 billion that its lent to ailing companies since the financial crisis began last year. that is a drop of about $200 billion from their earlier estimates. new treasury report shows that the portion lent to banks actually shows a slight profit. the report will be presented to congress today. we talked about the government's bailout with treasury secretary tim geithner last week. >> the next couple of days will show the latest estimates of the return of the taxpayer on these investments.
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and i think you're going to see in that report for the first time, a range of estimates say that the government of the united states, the treasury, on -- in items of the investments in the banking sector, will earn a positive return. >> geithner has said the obama administration will soon propose when and how to end the program safely. now, let's talk about citigroup. citigroup reportedly wants to repay $20 billion in bailout funds. the ft's reporting people close to the situation say that if citi fails to launch a capital-raising exercise by next tuesday, it will be practically impossible to do so until after repositioning results -- after it reports its results in the middle of january. the government is said to be willing to coordinate a sale of at least part of its stake with the capital raising but the tight timing and worries about the bank's health might prevent that sale. plus, five more high-ranking executives threatening to leave aig if their pay is cut. the wall street report it includes the general counsel and heads of some of the company's largest insurance. two have said to have changed
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their mind over the weekend after the media got ahold of this. the ceo robert benmosche threatened to quit but he does not appear to be involved. >> you're laughing at that? >> yeah. >> my middle name for him. that is a cool middle name, you have to admit. the november jobs report had economists going back to their computers tinkering with their forecast for the economic recovery. steve liesman is in washington doing some monday morning quarterbacking. thanks for the note about cincinnati, steve. for one -- >> don't worry about it, joe. >> did you watch nebraska? very -- i thought it was over. and there was one second -- >> last second. >> that was so -- i was in shock. i'm still in shock. >> i'm just glad to see your town has something going for it, joe. >> and the bengals won, too. >> the bengals, not too bad this year. >> we have more than that. we have a lot of things going for them. >> and is it better cincinnati winning or pittsburgh losing for you, joe? >> we like that. we like that.
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when i hear from tony fratto how it's trophy town, trophy town. what's going on? >> there's a glaring contradiction in the weekend report. one they see the friday report as the real deal. they kept going over and over saying, this thing's real and few if any expected it. the hours worked going up, revisions, all that stuff made people think along with the temporary workers that it was the real deal. so are they changing their growth outlooks? slightly. bottom line is economists like the market being very cautious and waiting for confirmation of the good news in the days, weeks and months ahead. somewhere in here, guys s a trade. jpmorgan and other economists lowered very slightly their unemployment outlooks by a couple tenths of a percent. 10.2% to 10.5% is roughly seen as peak unemployment rate. we've pretty much reached it or will reach it in the next quarter -- first quarter of 2010, according to reports i've seen. bob barbera says no jobless recovery in 2010.
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he looks for 200,000 job gains. we have to get him on. most economists did not alter their fed outlook. you saw the fed funds future market they increasingly priced a june rate hike. most were on track for summer or later 2010. jpmorgan seize strong profit recovery and weak gains for labor. take a look at some of the numbers here. one of the things that's most interesting is the hours worked. there's the jobs numbers right there. but moving on to the hours worked, what you see is that we're positive, really strongly positive, for the first time in longer than two years. that's something that will speak to better labor gains, but not so much as it will hurt profits. you can see here this forecast from jpmorgan and what they show as very strong profits, eventually leading to unemployment. there's a lag. companies make a lot of money in the meantime. i'm in d.c. for ben bernanke speaking to the economic club in
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washington, d.c. we'll listen to what he has to say. the number one thing you're looking for, guys, is the jobless claims on thursday. highlights, looking for confirmation in that 450,000 range. >> thanks. what's your middle name? >> edward. >> steven edward. very good. richard bernstein, poor guy, has -- >> his parents couldn't afford one? what's the deal? are they trying to be frugal? >> guess who else didn't have a middle name. harry s. truman. >> the s was made up? >> the "s" stood for "s." they wanted to satisfy both uncles. one was named anderson shipp truman and the other was solomon. >> can i just make a point here? >> if you must. go ahead. >> you've taken the monetary moose from out in jackson hole and labeled him a media moose. i want to take exception to that. >> he's not the monetary moose. he's the momentum moose. i told you that earlier.
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>> no you did not. that's the name. >> the moose we had showed in one of the teases before, steve got mad because it was the monetary moose, we called it the media moose. i said it's not either of those. it's the momentum moose. >> all right. thanks, steve. >> sure, joe. let's get the monday morning outlook from our next guest. joining us from new york, barry knapp, barclays head of portfolio strategy and our guest host richard bernstein, who doesn't have a middle name, of bernstein capital -- >> how did this become the topic of the morning? >> i feel bad. barry, i don't know if you've been watching the -- earlier, but was friday a day we'll remember? in fact, we haven't mentioned that it's december 7th. a lot of our viewers want us to mention that 68 years since pearl harbor. we will never forget that. but was friday a day we'll remember, do you think, when the dollar rallied, when maybe the job picture got better and that trade that stocks go up, dollar goes down? maybe that's finally broken?
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>> i do. i think it was major inflexion point. it was the last piece of the recovery puzzle, was the labor market. now, from my perspective, jobless claims had been dropping quite sharply and were at a level that is typically associated with the fed starting to reverse policy. that is down 30%. but still, people needed to see a better payroll report. if you look through and you mentioned some already, but if you look through awe the cyclical aspects, the service sjeng tore sector, the net revisions, temp employment, there's a lot of numbers that point to cyclical return. it's the beginning of the end for this ultra-easy fed policy. it's interesting, i thought probably the best thing i heard last week on your show anyway was from president bowler who said there's way too much focus on interest rates and not enough focus on the end of qe. i couldn't agree more strongly. quite frankly f you think about
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what qe has been attempting to do, which is to create negative real fed fund rates, just the reversal of that and then policy -- you know, the liquidity training may not impact the broad economy but will surely impact the -- you know, the capital markets. >> barry, it's rich. you know, there's probably no bigger consensus out there right now than people should be in things like commodities and gold and emerging markets. a lot of investments that benefit when the dollar's weaker. if we're now talking over the next year, year and a half that the fed will be tightening, who knows when, but will be tightening at some point, shouldn't we be moving out of those investments into more dollar appreciation-friendly type investments? >> i would agree. wie struggled with the material sector all year because it's been -- frankly, when we've looked at things like net revision, the material sector has been so far ahead of, you know, net revisions, so far
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ahead of the core fundamentals that it hasn't made a lot of sense to us. it's had a case of china hype all along. the energy sector, emerging markets, all those dollar-related plays, yeah, they're overdone. i know that there's a common view that we will wind up with dubles, monetary policies a blunt instrument. i happen to agree but i think that's likely to happen after, say, a six-month period of adjustment to the fed starting to tighten policy. if we wind up in a similar scenario to 2004 where we go through a six-month period of adjustment, they finally hike rates, six weeks later the market's stabilized, in essence the adjustment's already done, that would be the time frame when you would start to see those bubbles develop. yeah, i think there will be a correction in emerging markets. i think the dollar will stabilize. i think materials and energy stocks will struggle during that period of adjustment. >> both and you rich have used -- have stressed the word cyclical. that's always a word you can use to sort of have both sides,
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right? well, yeah, cyclically, blah, blah, but secular. now that's true but long term -- >> no, i think you're being a little unfair. >> well, let me get -- you're going to be here. you can -- >> i can defend myself. let barry talk. >> barry has a middle name so let me go to him. barry, are you saying long term it is secular, it's bad, we have all this stuff left over and this is just a cyclical rebound? >> well, you know, it's interesting. i'll answer that a little bit differently and then i'll come back to your direct question, which is, i was looking through, you know, '88, '94, 2004 when the fed started a fairly significant policy change from ultra-easy policy toward tighter policy. what tended to happen was in the early stages of that adjustment, all the cyclical sectors, whether they had secular trends going for them or not, sold off. once you actually got through the initial adjustment, some of the secular trends reasserted themselves. and so i think that's -- that's
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likely again this time. that's why, you know, we would use a selloff to buy tech stocks, to buy industrial stocks, perhaps energy stocks. we would not use the selloff to, you know, to get into the purely cyclical type of plays, small caps, for example. >> all right. barry, thank you. your middle name is? >> charles. >> abraham lincoln didn't have a middle name either. >> really? >> that's good. that's good company. >> yeah. >> yeah, i'll stay there. >> thanks, barry. >> all right, joe. >> see you later. up next, another battle for the white house. health care, the deficit, fixing the economy. let's add the mid-term elections as well. former deputy secretary roger altman and jim nussle, the former u.s. congressman and director of the office of management and budget, will open us up that can of worms.
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♪ do the hustle you may be wondering why we're playing "the hustle" because anymore nussle is going to be on in a minute and that's our own inside joke.
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>> such a stretch. >> one says democrats may be headed for abnormally large losses. joining us is roger altman, former deputy secretary and jim nussle, the president and ceo of the nussle group, also former u.s. congressman and director of office of management and budget. roger, you wrote an op-ed piece last week where you said the democrats really need a midcourse correction. that if they don't change their ways they're going to see some big losses in the midterm elections. why is that? >> well, first of all, the party which doesn't hold the white house typically does lose seats in off-year elections. so a certain loss would be standard, in keeping with history. but the real problem here is the juxtaposition of the employment outlook on the one hand, november 2010, on the congressional elections on the other. it does look now as though the unemployment rate is going to remain around 10% right through next year.
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it might tick down to 9.7%, it might tick up. it will be in that general vicinity. with that the prospect for unusually large losses does face the democrats. and that is the problem. >> do you think that this is anything that the democrats have done wrong? anything they could do to adjust this? or do you think this is just happenstance they're going to be facing elections although a point when unemployment's still at 10%? >> no, i don't think they've done anything wrong. quite the con temporary. they inherited the most difficult set of economic conditions and for that matter global conditions since the inauguration of franklin rooseve roosevelt. at the same time there are some midcourse corrections, beck y as you noted, that i think would make sense. they have to do with jobs and the deficit and better relations with industry and somewhat more forceful stance, i think, towards wall street. >> do you think the administration has begun to tackle some of those with the job summit they held last week
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with the focus on jobs or do you think they need to move much more quickly? >> no, i think they are -- this is a smart administration. they are keenly aware of this problem about the employment outlook, juxtaposed against november 2010. they're very focused on it. and i think you will see a few of the things i mentioned there. i think you'll see additional initiatives on quick-acting steps to create jobs. i think you'll see perhaps in the state of the union address the president take on the deficit issue and make a strong commitment there. as to steps beyond that, i'm not sure but i think they're very much on top of this. >> you're kind of warning your own, roger, about a danger . when i saw becky read this i thought, did roger read that or jim say it. i know, i know, but when i heard it -- you know, maybe your motivation is so maybe they can do something about, it roger, but the epa, did you see the latest thing? business fuming. >> i saw it. >> i mean, what did you say,
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they're going to be a little nicer to industry? that would be a switch, because that's not the perception that the administration has at this point. >> well, there is growing disquiet in the business community. >> right. >> this epa possible step is -- adds to that. and i think it would be wise for the administration to calm that down. there are some people in the administration, like rahm emanuel and tim geithner and larry summers, who are aware of that, and i think they are going to work on that. but it's not a good thing if it deepens because the views of the business community often are right in line with views of independent voters and independent voters are, to say the least, pretty important. >> yeah. >> jim, i would guess you have some of the very same concerns as roger has. you may not be quite as generous. but how important, let's say, is the idea of looking after the budget deficit? >> well, first of all, i think roger was exactly right in his
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op-ed that he wrote on friday. unfortunately, i'm -- and i have enormous respect for roger but it sounds like he's changing his tune just a little bit. i mean, there is a problem. and the problem is, is that the democrats have chosen some challenging issues that they were not able to put out policy measures that were able to not only deal with those challenges on the one hand but also grow the economy on the other. the mill ard fillmore excuse that all problems go to the previous administration, i mean, that works for a little while but, frankly, it isn't going to be a cause that they're going to be able to take to the midterm elections. they have three things they've got to do. they can't allow automatic tax increases on businesses. they can't increase taxes on their own volition on businesses that are creating these jobs, these small businesses. they can't allow the epa to run amuck and to go out and start regulating and adding costs to businesses when they don't have the science to back it up.
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and, finally, they have some low-hanging fruit out there called the free trade agreements with columbia and north korea that they could pass very quickly, but those are not the agenda items they've chosen. instead, it's cap and tax, it's increase in entitlement spending, it's throwing out a bunch of political stimulus -- i mean, economic stimulus to try and create jobs back in their home districts, and none of that has worked and they're now reaping, i think, the unfortunate rewards for, you know, an again that da has that been off the rail since they began. >> roger, would you say the democratic administration has strayed in where it should be focusing its attention? we have had people come on this show and say it should be all about the economy and nothing but. what do you think? >> no, i don't think, becky, it has strayed. immediately after taking off, they put in place the $787 billion stimulus. it was the right thing to do. every business person i know
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would have and did agree with that. every economist i know agreed with that. it was the obvious immediate step. they took it quickly and took it big. that was the right thing to do. >> but health care and -- >> well, health care -- >> -- and cap and trade? >> health care is an issue, as we all know, is an issue that's been facing us for 30 or 40 years. president obama made a commitment throughout his entire campaign to take this on. they're on the verge of a historic achievement here. they will get a bill. it will be a very important bill, one of most important pieces in legislation in this country and it's going to be a historic achievement. you can debate whether they should have done that first or second or third. but, it's almost finished and it's going to be very important. and then i think you'll see them turn their attention back to certain additional stimulus measures, to the deficit, as i said, and to jobs jobs and jobs. >> jim, would you give the administration credit for what
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they've been doing with jobs lately? >> well, lately, yes. but there's no new information in the economy in the last 11 months that they couldn't have reacted to to begin with. jobs was the focus when they came in. the deficit was the focus when they came in. jobs still stimulus was the focus when they came in. not raising taxes during a tough economy was the focus when they came in. we had two trade agreements sitting on the table waiting for them to pass if they wanted to create jobs. the epa and regulation -- i mean, we could go on and on. there's no new information on the table except for one -- two things. one is, employment went much further -- unemployment went much further, much higher, than anyone expected because of the fact that they didn't act, a. and, b, the polls have completely tanked for the democrats and the obama administration and now they're panicking. i hope this panic doesn't cause them to run out with the credit card that is already over the max and try to put more stimulus on the table, so-called stimulus, that already we've proven this last year hasn't
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been effective, not only in creating jobs but also just getting out of washington in the first place. only 10% of it has even made it to the mailbox. >> that's incorrect. >> that's what i'm concerned about. >> roger, quick last word? >> well, that number is incorrect. about 30 -- about 50% of the stimulus has been obligated and approximately 30% of that -- >> yeah, but i'm a budget guy. i'm a budget guy, roger pip know what obligated means. i'm talking about cash spent to actually stimulate. >> the number -- the number, jim s 30%. 30% has been dispensed, has been -- >> i've been a budget guy longer than you have, roger. i know the difference between obligated and spent. >> jim, the number is 30%, just for the record. that's the correct number. 30% has been spent. >> roger, jim, thank you very much for joining us. we appreciate it. >> pleasure. coming up, paying back to government, bank of america paying up. citi group may be about to right a big check. we'll discuss bailouts and bank deals with congressman ed towns. (announcer) we call it the american renewal.
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among the stories we're following, general motors has picked recruitment firm spencer stuart to find a ceo. general motors wants a ceo familiar with the asian market and is said to be willing to consider non-auto executives for the post. a lot of news last week, starting with what happened with fritz henderson and then it
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got -- the plot thickened over the weekend. in the last couple of days. a bunch of younger guys -- >> managers coming up. >> yep. first they said an expanded role. certainly didn't look like an expanded role when you look deeper. he's getting up there, though. way past when a lot of people retire, but he looks great. >> 77. >> yeah. shares of new york community bancorp, taking over the asset of am trust, the fourth biggest one announced. it was a -- it failed and it was announced by the fdic on friday afternoon. let's take a quick look at the markets. you have been watching those futures come back to just about in line with fair value. on last check you'll see those dow futures down by about 10 points below fair value. let's get on our market discussion. rick santelli and todd colvin are standing by at the cme group in chicago, steve liesman, and
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guest host is richard bernstein. steve, you have news from the intelligence report? >> breaking news coming out later. t.a.r.p. official telling cnbc that bank repayments will hit $175 billion this year. the total so far, what's interesting is only $116 billion, counting the $45 billion coming from bank of america, so $70 in hand, $45 on the way, and the question is where this other 60 or so billion is coming from. they are projecting a total of $175 billion. saying they're going to reduce the cost of t.a.r.p. which will lower the '09 deficit by $200 billion down to $1.3 trillion. they're saying all bank investments from the fiscal year 2009 will be profitable. all their programs, capital purchase program, all the things they did will make money, they said. the initial $76 billion of the investment is now projected to have a $19 billion profit with
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the bank profits being offset, of course, bit aig and the auto company investments for the t.a.r.p. as a whole, becky. >> you know, steve, that's interesting. if you try to figure out where the money still is, you said $60 billion still to account for? >> looks that way. >> citigroup, potentially talking about payback, wells fargo -- >> those are two 20s, if i'm not mistaken. that would be a piece of it. if they expect citigroup to come back and a legitimate question as to whether or not they're getting the banks to pay back too early, you know. >> i guess the timing is what kind of makes me question it the most. why now? why all of a sudden at this point? especially with all the talk about the administration looking for more money for job creation in some way, shape or another. is there a sense this was politically motivated or this is really the time based on the health of the banks? >> two things come to mind, becky.
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the first is, there is a fight about the debt ceiling. they're going to raise the debt ceiling. this t.a.r.p. money helps them come in under the debt ceiling and might help them skate through for a couple more months without having to go to congress to raise the debt ceiling. the second thing is, we know from having sat down with tim geithner that there's a legitimate debate going on inside the administration. there are some deficit hawks in there. some want to show lower deficits and use this t.a.r.p. money for that and others say we have to put more money out there for jobs. there are those that want to bring the money in and put that towards reducing the deficit. >> rick, the idea that the government may make money on most of these programs, does that make you feel any better about them? >> i don't believe they are. >> why is that? >> because, just because we're -- we've created a liquid environment for the banks to make a boatload of dough, they could pay this out of their bonuses, doesn't dismiss the trillions and trillions and trillions of dollars of
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problematic holdings and things like fannie and freddie. they've just played around with the balance sheets. we're still nowhere near, if you group it all together, any significant improvement. we just have a banking sector that's been the beneficiary of programs at the behest of shoveling areas into more of a covert, darker, less transparent environment where we can't see where the problems and the debt really are. >> rich, you want to add your thoughts to that? >> i'm not quite sure it's as sinister as rick makes it out to be. i think it's more the government gave the banks basically very cheap funding with little restriction. they took that money, with the very cheap cost of capital, and invested in things that didn't necessarily benefit the u.s. economy. like commodity swaps and currency swaps and things like that. >> does our guest refute the fact that we have, what, dozens -- about a dozen, trillion of problematic securities hidden in various government agencies where they were there two years ago?
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>> no, no. but that's not my point. my point being -- >> well, that is my point. >> okay. well, i think in terms of -- >> rick -- >> -- in terms of t.a.r.p. and what happened, it was simply how much t.a.r.p. money was ultimately spent benefiting the u.s. economy and how much was spent on trading and proprietary trading that didn't do much for the u.s. economy but did a lot for nonu.s. economies. that's the biggest question. second i would ask, yes, thee are profitable, but the question s what was the rate of return on those securities? anybody can invest and get a positive return through time. the question is, what was your rate of return and could it have been spent better? >> can i make -- >> yeah, steve. >> can i make a point on that? first of all, the treasury is being very, very specific about what it's claiming here. the fact that rick is taking a different yard measure here of what they're measuring is completely different. they're specifically saying the bank investments from t.a.r.p.
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will be profitable. they're not making any claims about fannie mae and freddie mac and what that cost the government or the other liabilities of the government. very specifically the profits banks from the t.a.r.p. that's it. the first order. second one, to richard's point about what is the investment? you know, i would point to hank paulson, who took a gamble on the american banking system when everybody said it was a dumb thing to do, and invested in it, and he got the money back. >> although, steve, there has to be a huge sense of frustration that the banks have made money, we may have made money on the t.a.r.p. funds coming back in, but banks weren't necessarily doing what the administration had hoped with that money, which was to make loans. >> i agree with that, becky. the bottom line is, the t.a.r.p. money was put there to save the banking system. if richard could calculate -- >> the banking system could then, in turn, turn around to make loans to keep businesses afloat and consumers still be able to get cash, too. >> yes and no. i argue if the banking system had collapsed we wouldn't be talking about any banks around, really, to make too many loans. that would be the first thing. the trouble is, you can't put a return on investment on that,
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saving the banking system. the bottom line is we got lucky, we got money back, or somebody made a good investment. at least that small portion -- not small but that investment of the investment is turning out to be a good deal. >> steve, don't you think there's a good divisions in aig that could show they're making money? >> i assume so. why? i don't get it, rick. i'm missing it. >> you're missing it? when you look at accounting, whether it's united states or aig, you just don't look at a sliver of it. in the end, all those securities the banks hold you now hold. >> i agree with that, rick. and we did come in and we're going to lose money from aig almost certainly. but my point is that what i reported rick, very specifically, was that the banking portions of the t.a.r.p. money made -- of the t.a.r.p. investments made money. >> you will say that that -- >> in fact, rick f you listen to what i said at the end, i said the treasury is reporting that the auto and aig investments will offset some of the gains from the banks. that's all we reported, rick. you want to take it further than that, have fun.
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>> todd, let's get your take on where the stock market stands right now. you're talking about futures at this point, down by ten point. that is some major improvement from what we saw earlier. what was the driving factor earlier this morning? >> well, i think if you go back to friday and the overnight trade, we have seen a pretty good recovery on the treasury side. likewise, stock which is gave up some of their gains will likely trade sideways. the best indicator for the stock market is going to be christmas sales and the vix continues to trade low. that's been a great directional barometer for equities all year. we'll see good buying at 3.5% in equities and some sideways and come january 1 it will be a new ball game. >> thanks very much. >> beck y one quick thing. the report from treasury on t.a.r.p. is more likely wednesday now, not monday. i think i might have incorrectly said monday. it's more likely wednesday. >> i think that had been -- something we had been expecting from other reports as well but wednesday.
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we'll stay tuned for that. steve, thank you very much. coming up, the cable wars north of the border. ceo of canadian cable giant rodger will tell us how they plan to take the lead.
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next, bank of america paying back the government and citigroup may be planning on writing a check to uncle sam. first, though, we'll discuss the bailout, the bank of america/merrill deal and congressman ed towns. compare a well equipped lexus es, to a well-equipped buick lacrosse. get inside each. and see what you find. if perfection is what you pursue, this just might change your course. meet the new class of world class. the twenty-ten lacrosse, from buick. may the best car win. in 25 years, global energy consumption will increase by 50%. to meet demand, we'll need to harness the power of sun... wind... waves... and atoms. but that's not enough.
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bank of america getting ready to repay $45 billion in federal bailout money.
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it comes as b of a searches for a successor to retiring executive ken lewis, the man behind the acquisition of merrill lynch, and why rich bernstein has his own company now -- no, that's not why. you were already out, weren't you? you already left. >> no, i was there. >> you were there? >> had-t had nothing to do with -- >> yeah, right. go back down a little bit. let me just get -- forget it. the deal has been under scrutiny by house oversight. joining us to talk about b of a and more, new york representative ed towns, chairman of the committee. great to see you this morning. >> good morning. delighted to be with you. >> our own steve liesman reported there will be a profit on t.a.r.p. when it's all said and done. do we -- and then we had a little -- >> at least from the banks. >> at least from the banks. >> is that something that puts a smile on your face or -- >> it puts a smile on my face but i would hope we would take that profit and now create jobs. i think that's really what we need to do. people need to work.
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>> okay. so last week there was that controversy that maybe a lot of it should go into that and then judd gregg said something in here, right? the way -- >> it can't. >> the senator said the way it was written, and he wrote it, the money would have to go to pay down the deficit. >> you know, first of all, i mean, i was hoping that the t.a.r.p. money would be used to sort of free up money and get people loans and sort of really restore the confidence. but the point is, once you write something, you can always make changes. when he wrote it, the unemployment wasn't as high as it is now. and i think that looking at it now and recoizing how important it is to put people back to work, understanding that there's a correlation between unemployment and crime, all these kind of things, and plus people need to have jobs. and looking at that, i think the members of congress now look at it and say, yes, sfc shg, as mu needed to pay down congress, we
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need to make jobs. if we didn't put the money in t.a.r.p., i don't know where we would be. we're still better off. investments in terms of t.a.r.p. has really made a difference. >> do you think that when it get paid back it should be used for unemployment insurance or specifically more for -- how do you create -- infrastructure? what will you use it for? >> i think we should call in the small business community and sit down and work out arrangements with them, create zones, especially in these areas where you have high unemployment. and to say to them, look, we need to create jobs. we need to make certain people are put back to work. you know, let's talk about how to do this. and then take that money, work with them and create jobs. most jobs are created by small businesses anyway. this would be an opportunity to do that. and i think that recognizing where we are, this is what we should consider. >> congressman, do you think that there's any -- how would you respond? you got the epa thing today,
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which small businesses -- a lot of businesses are worried about this. taxes are going up. a lot of people say small businesses feel picked on by this administration. and that corporations aren't really -- don't feel like they're in favor with a lot of the things happening. they're worried about an uncertain future. is that just not true? >> well, no, i think what we need to do is talk to small businesses. you know, and let them know in terms of -- really get a feel for them and what the concerns are. you know, sometimes i think those of us in government, you know, we sort of read and get material and i think it was thomas jefferson read a book on how to swim and jumped in the ocean and almost drown. i think that because he just read the book. he didn't know in terms of the practical part. i think we need to talk to small businesses to make certain that, you know, we know in terms of their concerns, their views and feelings about the possibility of creating jobs. so i really feel that's where we need to go now more than anyplace else. if we leave them out and sort of make a decision and watch it happen, then i think we create
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more and more problems for ourselves. we need to create jobs. people, everywhere you go, is, number one, is jobs, number two is jobs, number three is jobs. >> congressman, as one who's starting my own business, as joe politely pointed out, that i can tell you that the banks are not lending to small businesses. we've had situations where banks literally would not return our calls. how do we get the banks to take, say, whatever t.a.r.p. money they've now received and paid back or strengthen your balance sheet, how do we get the banks to actually start lending to small business? >> i think we have to really go back and take a look, you know, at those banks that receive t.a.r.p. money and to satisfies the questions with them. look and see in terms of how many loans have you actually made. and i think that the legislators have to do that because let them know we're serious about the loans. because if we don't, then they'll continue to take this money, invest it any way they want, make money and still we don't change the situation we find ours in in terms of the
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economy. and they're going to have to be forced. i hate to use the word forced, but the point is, where we are today, we have to gain -- confidence has to be brought about. if we don't have that then we're not going to be able to turn this economy around. >> right. >> congressman, thank you. no middle name, right, edolphus towns. >> congressman towns. >> your mother added an "e" to it. >> i don't know if it had anything to do with the relationship there. >> i wonder behind the scenes what was going on there. congressman, thank you very much. appreciate it. the cable wars are heating up but the battlefield is up north. that dir mohammed will tell us about cable's changing landscape. e's a home by the sea powered by the wind on the plains. there's a hospital where technology has a healing touch. there's a factory giving old industries new life.
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the cable wars are heating up in the great white north with bell canada and tellus looking to take marketshare from the industry leader rogers. joining us right now is the president and ceo of rogers communications. sir, thank you very much for joining us today. >> thank you for having me, becky. >> you know, we've been hearing an awful lot about significant
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changes that are under way in canada, big changes thatre going to be happening probably over the next 12 months as all of the major companies there kind of changed the way they do business. what are your plans on how you may change and alter the way you're doing business? >> well, fundamentally, we see an industry that's in transition. in many ways what we see is the wired world going to wireless and a lot of what we traditionally got on tv is now being shown on the pc with a lot of video downloading, so -- and a lot of the services we have going to ip. so from a rogers perspective, what we'll look at is maximizing how we take our asset mix to market and our asset mix, just to be clear, is about 60% wireless, 30% cable, and 10% media. it's a matter of saying, how do we take these products and services and put them together for the customer? >> although one analyst, at least, has written rogers could go from a position of competitive advantage to one of
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competitive disadvantage, because these new upgrades are things you'll have to bear the cost by yourself versus somebody like a bell or tellus who are helped out by maybe apple and some of the other wireless or some of the other handset companies who will help them make those adjustments. >> well, a couple of things. one, we've had the best network for sometime now, the most reliable one for a few years which is the hsba-21, the fastest speed network available, 3g. we've got great quality. one of the things we like to point out is the strength we bring to the table can't be matched just with somebody going to the same standard. our great networks, great distribution, great branding, i think, that's what we'll bring to the table. yes, there will be more competition but, frankly, we feel pretty good about the position we're in. >> we're seeing a little consolidation here in the u.s. telecom sector, most notably this deal last week between comcast and ge over nbc universal. do you expect to see any sort of consolidation like that in
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canada? >> well, it's interesting. i think in some ways if you look at rogers in many ways we're mirroring many of the things people in the states have been doing. comcast would be an example. today, again, we have a 37 marketshare on wireless and we have that asset versus going out and getting a clear wire. we already are the largest cable company in canada. on the media side, something that people may not appreciate, we have a mix of assets, including specialty tv, the best one -- one of the best sports channels in the country. we have an over-the-air broadcast called cd-tv. we have magazines, radio stations, and so we've got all of these assets that we can bring together. i do believe that the marriage of content and distribution is where the game is going to be played out. >> okay. nad ir, thank you very much for your time. we really appreciate it. >> thank you very much. coming up next the most important item to watch between now and the end of the year, "squawk box" will be coming right back.
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our guest host, wall street veteran rich bernstein. we're talking about small caps. >> mm-hmm. >> now you referenced what the
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congressman just said that if they don't have access to capital. >> that's exactly right. my argument has always been you want to be the provider of squares capital. if people can't get capital you want to be a provider because you can get a higher rate of return on that. we've talked about it many times this morning, with the congressman, we talked about it with small business lending before and things like that. small business in the united states is still cut off from capital. that's where the highest rates of return probably are for investors right now. how can you get close to that? the closest way to get to that is through small cap valu-rite now. it's a cyclical play but compared to other cyclical plays like gold, commodities, emerging markets, it's an awful lot cheaper. as we discussed, nobody is talking about the january effect. >> thank you very much for coming in. great seeing you. >> thanks for having me. >> that does it for us today. be sure you join us tomorrow. right now it's time for "squawk on the street."

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